tv Nightly Business Report PBS January 23, 2015 7:00pm-7:31pm PST
report" with tyler mathisen and sue herera. disappointing delivery. shares of ups tumble. the company warns its fourth quarter profits won't see what many expected and the reasons may sound familiar. get out to vote. that's what they do in greece and investors will pay close attention to the outcome of sunday's election. plus higher education. president obama is proposing a change to the way millions of families save for college, a popular saving vehicle could lose some luster. all that and more tonight on "nightly business report" for frid january 23rd. >> good evening, everyone. three things that we've been reporting recently came home to roost today. the strengthening dollar gridlock at west coast ports, and falling oil prices.
at the center of those issues was a company almost everybody knows. ups. and wasn't good. shares tumbled nearly 10% making it the worst performing stock on the s&p 500. after the parcel shipping company closely watched because it's viewed as the barometer of the health of the economy warned investors to expect weak fourth quarter results. the reasons? unfavorable currency rates, volume fluctuations because of the west coast port disputes and those low oil prices? well they aren't helping as much as many believed they would and that's not all. morgan brennan reports. >> reporter: united parcel service delivering bad news to investors slashing its fourth quarter earnings forecast. the problem? ups spend a lot of money to successfully deliver holiday packages on time and avoid a repeat of christmas 2013 when millions of packages were delivered late. but it did so at a big hit to the bottom line. analysts say the shipping jienlt overcompensated. >> ups for some time has been
using prices to try to maintain its market share versus fedex on the ground in the u.s. one, two, they overspent guaranteeing service. they certainly couldn't have a repeat of last year's service disaster and so you combine those two events in which you're not really seeing any improvement in yield and you're spending ever more to deliver those packages and a big earnings miss. >> reporter: ups s added capacity was necessary to handle the extreme spike in volume on the two days but demand disappointing on others costly decline in productivity. and delay at west coast ports had an impact. ups cut its guidance for the full 2015 year citing pension costs and currency head winds. all of this took shares of ups plunging 10%. but doesn't stop there. shares of rival fedex fell in sympathy as well. despite the fact that fedex reaffirmed its own fiscal 2015 forecast. the question now, the ups
experienced slower than expected demand where did that market share go? >> we saw this happen before back in 2005 that ups had service issues and in 2006 you saw outsized gains and volume by fedex as a result. that's the way it works. >> reporter: but don't hold out the u.s. postal service either. it set a new holiday season record. for "nightly business report," i'm morgan brennan. well the strong dollar and falling oil prices also impacted general electric's fourth quarter results but in a much different way. the national post hired profits and said it can handle currency moves and declining crude in the year ahead. investors like that news and sent shares to the dow component up to $27.48. mary thompson has more. >> reporter: having bet big on the oil and gas industry general electric krerks eo jeff emelt said can deliver as oil prices fall. >> to manage the company to
volatility. we see the potential for risk based on current oil prices, we aggressively work offsets to cause actions and positive opportunities elsewhere at ge. >> reporter: those opportunities include what appear to be signs of growth in ge's health care business. strengthen its aviation unit which makes service jet engines and the upside of lower oil for a manufacturer like ge lower costs. even the dollar strength and issue for a firm that gets 53% of its revenue outside of the united states is seen as manageable. ge said it might cost a penny in profit this year if the u.s. currency remains current levels against the euro. crediting the diversity of its businesses ge survived an earlier outlook for 2015. the firm expecting to learn between $1.70 and $1.80 for the year. this comes as ge reported an increase in 2014 fourth quarter profits and revenue. thanks to strengthening its
aviation and power businesses which helped to offset an expected decline in its once rapidly growing oil and gas unit. here's analyst dean dray. >> has about 16% of revenue exposure from oil and gas. it has been one of the growth rivals as they nv've invested in this business but now in a position where other parts of ge's portfolio that can be an offset. >> reporter: this to help offset investors' fears, ge fail to keep recent promises. for "nightly business report," i'm mary thompson. fellow dow component mcdonald's closed out a difficult year. the world's largest fast food chain missed wall street's earnings and revenue estimates and today, ceo don thompson warned business will continue to be weak in the first path of 2015 but also said the company is taking decisive action to regain momentum sales and market share. shares of mcdonald's finished the day lower by about 1.5%.
let's get to the markets now. ups one of the biggest drags on the stock today but existing home sales rose nearly 2.5% last month but that was a little shy of estimates. all in all today, the dow fell 141 points. the nasdaq was the standout. it gained 7.5%. s&p 500 down more than 11 points bu posted first weekly gain of the year. whoo-hoo! the nasdaq the big winner rising more than 2.5%. as for oil, attention today was squarely on saudi arabia the world's largest exporter of petroleum and what effect the death of sau de king ab dull la had. it was a volatile section for prices with west texas intermediate higher in the day only to turn around and erase the gains and close down 1.5%. brent crude rose slightly. jackie deangelis has more on the
death of the saudi king and what it might mean for the price of crude. >> reporter: the passing of king abdullah was not a shock to the market. 90 years old, frail and poor in health for some time named his half brother salman his successor to ensure continuity. still, markets reacted on perceived uncertainty. the king's passing raises questions regarding saudi arabia's oil, politics foreign relations with the united states. >> king salman was a deputy of king abdullah for the last few years. prince was the second deputy also. but the element of continuation and the element of stability will be preventing no doubt about that in the foreseeable future. >> i think the next generation is going to be very much about looking out for their own self-interest, which, you know, you can't blame them for but won't necessarily be the kind of
happy u.s. interest we come to enjoy. >> reporter: thus prices pop. >> we spike the dollar on the news almost to pay homage to the king and move to the reality on the ground in the near term future for lower prices. that's why i continue to target towards $33 if not lower for a time. >> reporter: even saudi arabia's prince alawid said while prices see volatility not likely to move back to historic levels. >> it's inevitable the price may go up more but i think we'll never see the price for oil again at $100. >> reporter: where do prices go immediately? the fundamentals suggest lower. the department of energy reporting a weekly bills in inventories more than 10 million barrels, that was the largest weekly increase since 2001. analysts saying this shows that supply demand economics will drive this market. and those dynamics show that supply continues to rise even in the face of price decline.
and demand from places like china, japan, and europe continues to fall. for "nightly business report," i'm jackie deangelis. greece where the country prepares to vote in a general election sunday voters won't just choose a new government. they could chart a new and very un indebted country. michelle caruso-cabrera reports now from athens greece. >> reporter: this man, self-described radical leftist, said to be the next president of greece. polls for the sunday's election show him in the lead by ever widening margin. promised to undo many of the painful austerity measures put in place many greece in the last five years, things like govern job cuts lower wages and higher taxes. all enacted in exchange for billions of dollars of bailout loans. he and his party refer to it as financial water boarding. ya niece is one of the economic
advisors. >> our plan is to renegotiate, to deliberate with our partners. in order to render our relationship with europe and with acp to reconstruct the logic of the bailout agreement. >> reporter: if he wins as promises an international showdown between greece and lenders. the european union, the imf and european central bank. the showdown potentially so contentious, it might lead greece to exit the euro what is now being called a grid sit. dr. john emileos, self-inscribed marxist, said that's not going to happen. >> means devaluation of the purchasing power of the greek people. >> reporter: still, it's clear investors are worried. for most european countries, interest rates are extremely low due to the promise of help from the european bank. greece's interest rates are much higher hovering around 10%.
today, ceeprus told me he represents stability. >> for the united states the message for greece the next day will be optimist, of hope. i think that's the victory of the people on sunday will be a strong message of vitalization progress. >> reporter: should investors be fright sentenced. >> no no. >> reporter: there's no fear? >> there's no fear. only hope. >> reporter: ie polls are right and he does win, the world is set to find out. "nightly business report," michelle caruso-cabrera athens. the talks in havana continue today as u.s. and cuba work to restore diplomatic and economic ties between the two countries but as eamon javers reports now from havana the indifferences remain. >> reporter: as cuban talks wind down here in havana both sides
make positive noises about what they accomplished here but not citing any tangible results of the day of talks. earlier today, andrea mitchell at nbc sat down with the cuban diplomat sitting down with her throughout the week. she said both sides look for common ground. >> we believe that countries which have differences, they can find a common ground to discuss about these differences with respect and at the same time to look for opportunities for common interests. >> reporter: in the united states diplomats here say americans should be patient and not necessarily expect major change here on the island of cuba. >> we have had only a month since the presidents made their announcement and we have only had the first conversation about how that policy will be implemented. so it's very hard to say exactly how this will work. >> reporter: and one of the most highly watched areas for u.s.
businesses, roberta jacobson said it's not yet clear how much telecommunications and technology equipment the cubans will allow to be imported to the island. on the u.s. side the new regulation side last week will allow american companies to add technology to cuba but roberta jacobson said the cubans haven't given any indication of how much of the imports they'll allow here. in havana i'm eamon javers for "nightly business report." still ahead, millions of families use 529 plans to save for college but the president has a proposal to change them. could end up costing you. millions of families use 529 plans to save for college.
one of the reasons they're so popular? tax savings. currently, earnings are not taxed as long as the funds are used to pay for college expenses but the president is proposing to eliminate that tax benefit. today, white house press secretary josh earnest said the plan is part of bigger reforms. >> the reforms the president proposed for the 529 program are reforms that he would consider only in the context of the other education reforms he put forward and when you consider that entire package of reforms, the tax cut that we're looking at middle class families is $50 billion. >> john harwood is in washington with more on this proposal and why is the president pushing this? this is a very popular instrument for people of all different economic brackets john? >> reporter: well the president is trying to target federal resources to the people he thinks are most in need. so while curbing the tax benefits of these 529 plans which the administration said 70% of the assets in those plans are held by people with incomes
over $200,000 a year he's dramatically increasing the tax credit up to $2500 per student for families making less than $180,000 a year. it's a matter of priorities and it's redistribution and to give money to a group that he thinks is more deserving he's taking some from people who make more money. >> let's talk a little bit, if we can, it gets real murky real fast really into the weeds but if i have an existing 529 plan that portion would be segregated and not subject to tax on withdrawal for use in educational expenses but any deposits i added to the existing account or any new accounts i would open would be? >> yes, new deposits. the earnings on deposits already in those accounts and 7 million families have them would continue to be tax-exempt. it's the new deposits subject to taxes. >> and would those new deposits
or those new accounts and withdrawals from them i should say, would that be taxable to every single taxpayer or only above a certain income level? >> reporter: to e administration looks at this vehicle one that's inefficient towards targeting federal resources, tax expenditures to the people that the administration thinks are most need of those benefits. so they're not distinguishing a means testing 529 plans themselves they're simply shifting resources towards different vehicles tax benefit vehicles. >> john what are the odds this will get through congress? >> r low. like the rest of the president's plan. remember the president proposed $320 billion in tax increases mostly on capital gains income through higher rate through taxing the appreciated value of inherited assets as well as the financial fee the president is imposing on large banks, this
529 proposal would raise $1 billion. it's a small fraction of their overall plan which means two things. first of all, if any part of this plan goes through, it's very easy for the 529 part to fall away because it doesn't raise much money and the people who hold those plans are politically influential. >> john harwood in washington. john, thanks as always. >> reporter: you bet. box makes a big splash in its trading debut. called a big box. that's where we begin tonight's market focus. cloud storage company priced initial public offering $14 a share above the expected range. a market value of $1.5 billion raised $175 million from the stock sale. explained what makes box different from the competition. >> we help manage corporate information, secure it and make it accessible different devices, collaborate around it and that's not the focus of google much more consumer oriented but the most important point is we're kind of participating in a once in a lifetime transition from on-premise computing to cloud
computing. >> stock goes up 66% in a day, that's good day. $23.23 the close there, higher by $9. state street topped wall street investments today. powered by the recent surge in volume and foreign currency markets but investors focused on the outlooks since a falling euro is cutting revenue from that region. shares down 6% to $72.40. shares of gopro lot a lift after the nhl announced a partnership with the camera maker. fans can now watch hockey live from the player's perspective, which sounds totally cool. the first with a major pro league. stock rose to $52.51. valero hiked by 41%. the payout 40 cents a share made to shareholders in march. the yield on that dividend is now 3.2%. the stock popped 4.5% to $50.16.
the farming equipment maker deere is laying off more than 900 employees in iowa and illinois the latest round of job cuts by grain prices hurting demand for machinery. shares fell more than 1% to $88.35. our market monitor tonight is cautious on stocks but said investors should be focused on yields and opportunities that will be coming in the energy sector. channing smith joins us now, corporate director with capital advisor. what makes you cautious? >> i don't know if we're cautious. we don't see a bear market we don't see a recession. until investors start to feel central bankers or lose confidence we don't, but we're trying to be realistic. if we look at valuation, that's concerning us. the shiller p.e. an adjusted p.e. that takes the average earnings of s&p companies the last ten years divided by market prices it's at 27.
and we've only in the 134 year history been above this marker and so we're just not seeing a good valuation opportunity, tyler. >> so how are you finding opportunity? what are the metrics that you are using in a market either fully valued or slightly overvalued in some stocks in order to invest cash? >> we're really looking for dividend yield. that's what we want to see. we expect to see 4% to 6% in the next couple of years. if we find dividend stocks paying 4% to 6% we'll take that but they're hard to find. >> let's look at a couple then shall we channing? starting with wynn resorts. >> wynn we're looking hard to find opportunities. wynn is a casino operator. 30% in las vegas and 70% in wynn. they've struggled really the last couple quarters. down 40% in the stock. an anti-corruption campaign in china that hurt near term results.
they pay a 4% yield and a special dividend in the last six years and we think they'll pay another dividend yield at the end of the year usually between $1 and $8. usually between 5% and 10% for wynn resorts. >> next a pick in the energy sector for a conservative investor you say. some people say oneoak and others say one oak. >> a 5.5% yield. they move natural gas liquids all over the country, well run. they get paid for moving the product. so they have some commodity exposure but we think the dividend is very secure and a way to play energy and get a 5% yield. >> continental resources is your third pick. more famous lately for the divorce of ceo and founder. >> yeah, you know, it's a riskier play. this is really a play on the commodity price itself. this stock was at 80. it's gone down to 30. it's about 43 or so in change
today. if you believe that energy prices are going to be in the $60 to $70 price range, really about 6 to 12 months out, this stock has a lot of appreciation. they're very well positioned in the bock in and oklahoma in what's called the scoop play. we think production growth here is going to be enormous and so it's a little bit riskier play if oil prices go down this stock will suffer but over the long-term, we really think the stock has a lot of appreciation value. >> channing thank you very much. changing smith with capital advisors. coming up call it sneakernomics. the teenager turning pricey collectible footwear turning it into a business all on his own.
a teenager and his sneaker sounds pretty typical, but not for one 16-year-old with the help of his father. that and an enormous collection of high end kicks and then saw an opportunity and turned it into a growing business. kate rogers has the story. >> reporter: most teenagers spend the money they make at their afterschool job on fast food music cool clothes and shoes. and in a lot of ways chase reed no different. only he turned his passion for looking cool into his afterschool job and more. at 14, chase had amassed $30,000 worth of basketball sneakers. but last year he sold his entire collection to open up the world's first sneaker pawnshop
sneaker pawn usa in harlem. >> it was hard to let go of the collection because you're 14 years old with 200 pairs of sneakers and now all of the sudden you have to go back to zero? this is not really fair. this can't be life. like, that's what i was looking at it as until i got older, i'm like all right. it was really worth it. >> reporter: like many 16 years old, chase is hooked on instagram only his goal is to drive foot traffic here to sneaker pawn usa to see what's not in store. these lebron jewels retail for $250 but they're selling them over $1200. troy, his business partner, said the social media posts drive customers to the stores daily. >> this is the new stock market. the market for sneakers anywhere from $100100 to 800%.
>> reporter: the hype is real. the npd group said it grew by 20% in 2014 with no signs of slowing down in the year to come. with idols like bill gates, steve jobs and jay-z, chase who is just 16 has big plans for the future hoping to open more stores around the country. >> if i get a nice shoe i'll sell it rather than collecting it. >> reporter: chase learned the art of letting go looking cool and make cash all before he turns 18. for "nightly business report," i'm kate rogers. >> read more about chase's profitable sneaker pawnshop. head to our web site nbr.com. he's one to watch, i think. finally tonight, the economic forum in davos, switzerland, by no means strapped for cash but the food prices in the tiny town are tough, enough to rile anybody's stomach. the price of a simple hot dog at a posh hotel is about 43 u.s.
dollars. the frank does come topped with pick els and fried onions but if you want to wash it down with a cold one, be prepared to dish out another eight bucks. >> hot dog, my goodness. >> can you imagine putting that on your expense report? >> we'll see some of them next week when we get back. >> 50 some odd bucks on a hot dog. that uz does it for "nightly business report" tonight. i'm sue herera. >> i'm tyler mathisen. a great weekend, everybody, and we'll see you here on
>> the state of the union, the state of congress, the state of the white house. and the state of the 2016 presidential campaign. tonight on "washington week." rnings we need to set our sights higher than just making sure government doesn't screw things up. we need to do more than just do no harm. i know the republicans disagree with my approach. i could see that from their body language yesterday. gwen: but it was more than body language. it was a significantly different world view. >> all the president really offered last night was more taxes, more government more of the same approach that has failed the middle class for decades. gwen: what instead? we dive into a debate that extends far beyond washington